IBM affected by DOGE cuts, downplays impact during Q1 earnings call

Tech and consulting giant IBM was not immune to the Department of Government Efficiency’s (DOGE) cuts.

IBM had 15 of its federal contracts canceled due to DOGE-related cuts during the first quarter of 2025, according to reporting from Reuters and Bloomberg. These cuts amount to $100 million in future payments, per Bloomberg. Federal contracts represent between 5% and just under 10% of IBM’s consulting practice.

After being peppered with questions during IBM’s earnings call Wednesday, Arvind Krishna, IBM’s CEO, clarified that the cancellations were related to cutbacks at USAID. Both Krishna and James Kavanaugh, IBM’s CFO, then proceeded to downplay the potential impact of DOGE on the company’s future business.

“We’ve had a handful of contracts, either statement of work, or cancel and on our annualized backlog of over $30 billion in total consulting,” Kavanaugh said. “This is like less than $100 million of backlog over a duration of multiple years. So while no one’s immune, we are absolutely focused on monitoring the identity dynamic process. We’re prudently cautious around consulting for the year.”

IBM’s consulting business made up 34% of the company’s revenue in Q1. Krishna added that the company’s federal government consulting contracts largely focus on crucial areas.

“The vast majority is critical work — we actually process veterans benefit claims,” Krishna said. “We help process how the [General Services Administration] does procurement. We help implement payroll systems. I don’t think of these as optional. Now, are there some areas around the edges which could be viewed as discretionary? Yes. But in our case that is the minority of our business, not the majority.”

IBM’s consulting revenue was down 2% overall in Q1, according to the company’s first-quarter results. Revenue from consulting in Q1 was slightly over $5 billion.

“The diversity across our business positions us well to navigate the current climate,” Krishna said. “Our portfolio and track record of execution reinforce my confidence on this next chapter of our growth. I look forward to sharing our progress as we move through the rest of the year.”